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2006 Keystone Business Climate Survey

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KEYSTONE BUSINESS CLIMATE SURVEY

Spring 2006

Dour Mood

Business climate, state government, getting low marksEdit

Confidence in Pennsylvania's business climate remains shaky, although it has improved somewhat from last years record low levels. Meanwhile, approval of government performance - especially the Pennsylvania General Assembly - continues to decline. Those are the key trends to emerge among employers who participated in the Lincoln Institute's 2006 Keystone Business Climate Survey.

The aborted legislative pay raise and continued inability of the General Assembly to deal in any meaningful way with the problems confronting the state have taken a significant toll on its standing among members of the business community. Employers have historically not given the General Assembly high marks for its performance. A year ago the state Senate had a 25% approval rating, with 48% holding a negative view of its job performance. In the current poll, approval of the Senate dropped to 9% and the disapproval rating rose to 72%. Numbers for the House of Representatives were similar: approval of that chamber's performance dropped from 24% one year ago to 11% now; disapproval rose from 50% last spring to 71% in April, 2006.

Employers don't just blame the legislature for the state's ills. Governor Ed Rendell eked out a 10% job approval rating (up from 8% last year) against an 84% negative job performance rating (up 4% from last year.) Other Keystone State politicos whose disapproval rating was higher than their approval rating include State Treasurer Robert P. Casey, Jr., (11% positive, 45% negative); and U.S. Senator Arlen Specter (29% positive, 57% negative).

On the federal level, mirroring his slide in nationwide polls, President George W. Bush's approval rating fell from 68% last year to 49% in the spring 2006 survey. The President's negative job performance rating rose from 28% to 39%. U.S. Senator Rick Santorum saw his positive job approval rating drop from 56% last spring to 52% this year, while his negative rating rose from 23% last year to 33% in the current survey. Federal Reserve Board Chairman Ben Bernanke made his first appearance on our survey with a 28% positive rating versus a 9% negative rating. Since he has only been on the job a couple of months, 63% have yet to form an opinion of the new fed head.

Business ClimateEdit

The Lincoln Institute found record pessimism among employers in both 2005 Keystone Business Climate Surveys. The first poll for 2006 finds a modest improvement in confidence levels, although they remain well below the historical average. Twelve percent said business conditions in the commonwealth have improved over the past six months; 56% say business conditions remain relatively stable; and 32% said business conditions have gotten worse. That is down from the 44% who told us last September that business conditions in the state had declined.

Exactly half (50%) of those participating in the survey expect business conditions in Pennsylvania to remain about the same as they are now for the coming six months. Thirteen percent expect business conditions to improve, while 37% say the Pennsylvania business climate will get worse. That number is down from the 46% who predicted a worsening economy in September 2005.

Employment levels are either stable or growing modestly. Seventy-two percent of the state's employers polled said that employment levels at their company is about the same now as it was six months ago. Sixteen percent reported having more employees, 12% said they have fewer. Looking ahead six months, 71% are predicting their employment levels will remain constant, while 21% expect to add employees, and 9% expect to employ fewer individuals.

Winners outnumbered losers in sales figures. Thirty percent reported sales have increased over the past six months, while 24% reported decreased sales. Forty-six percent said sales remained constant. Looking ahead six months, 50% say sales will likely remain level; 33% expect sales to rise; and 16% expect sales to drop.

IssuesEdit

Although Property Tax Reform remains one of the top issues in Pennsylvania, the state's employers don't expect reforms to be "meaningful." Ninety-one percent said reforms would fall short of what they want; only 6% expect property tax reform to have any significant impact on their operations. Revenue on taxes from anticipated slot machine gambling operations are not viewed as a solution to the property tax problem. Seventy-four percent said revenue from slots taxes would not result in a decrease in their property taxes, while 11% think they will see a property tax cut as a result of gambling tax revenue.

In order to reduce property taxes, participants in the Lincoln Institute's Spring 2006 Keystone Business Climate Survey said they would support a combination increase in income and sales taxes (30%) to make up for the lost revenue. Twenty-nine percent would like to see only a local sales tax and 12% would support only raising local income/wage taxes. Another 20% feels the current system should not be changed.

There are significant concerns in the business community over the impact of a recent U.S. Supreme Court decision that upheld the taking of residential property by local municipalities to enable private developers to build higher tax-yielding structures on the land. Ninety percent disagreed with that court ruling, 79% strongly so. Only 9% agreed with the court's ruling on the use of eminent domain.

When it comes to wages, the state's employers are generally opposed to an increase in the minimum wage, and in the use of prevailing wages. Sixty percent said Pennsylvania's prevailing wage law should be repealed; only 20% favor keeping the law which inflates the cost of public works projects. Fifty-five percent oppose increasing the minimum wage - with 44% strongly opposing such an increase. Thirty- eight percent support an increase in the minimum wage. As a result of a minimum wage increase, 22% said they would hire fewer employees, while only 1% said they would increase hiring. Sixty-six percent said a minimum wage hike would have no impact on the number of people they would employ.

Pennsylvania's ongoing struggle with medical malpractice insurance reform is having an impact on employees. Twenty-seven percent of the employers surveyed said that during the past year their employees have reported difficulty in obtaining health care due to doctors or other medical personnel having closed their practice or eliminated some services as a result of Pennsylvania's medical malpractice laws. Fifty-nine percent reported having no difficult.

MethodologyEdit

The Lincoln Institute's Spring 2006 Keystone Business Climate Survey was conducted electronically from April 2, 2006 through April 25, 2006 via e-mail link to selected distribution lists. As of the survey deadline, 121 employers had responded to the poll. Complete numeric results can be obtained at http://www.lincolninstitute.org.

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